CMP Product Development and Management 2 — Questions and Answers
Question 1: In the BCG Growth-Share Matrix, a product with high relative market share in a low-growth market is classified as a:
- Star
- Question Mark
- Cash Cow (Correct answer)
- Dog
Correct answer: Cash Cow
Cash Cows hold high market share in slow-growth markets, generating more cash than they consume, which funds investment in other portfolio products.
Question 2: What is the primary purpose of concept testing in new product development?
- To manufacture a trial batch of products for sampling
- To evaluate consumer reactions to a product idea before physical development begins (Correct answer)
- To test the product's durability under real-world conditions
- To finalize the product's price before launch
Correct answer: To evaluate consumer reactions to a product idea before physical development begins
Concept testing gathers consumer feedback on product descriptions or visual representations before investing in costly physical prototypes or development.
Question 3: Which pricing strategy is commonly used when launching an innovative new product to quickly recover R&D costs by charging a high initial price?
- Penetration pricing
- Price skimming (Correct answer)
- Cost-plus pricing
- Competitive parity pricing
Correct answer: Price skimming
Price skimming sets a high initial price to extract maximum value from early adopters willing to pay a premium, then gradually lowers the price to attract more price-sensitive segments.
Question 4: What does 'product mix width' (also called product breadth) refer to in portfolio management?
- The number of different product lines a company offers (Correct answer)
- The number of items within a single product line
- The quality range within one product line
- The geographic reach of a company's products
Correct answer: The number of different product lines a company offers
Product mix width refers to how many distinct product lines a company carries — the broader the mix, the more diverse its market coverage.
Question 5: During which new product development stage is the product first introduced to real customers in a limited geographic market to gauge genuine consumer response?
- Business analysis
- Prototype development
- Test marketing (Correct answer)
- Commercialization
Correct answer: Test marketing
Test marketing launches the product in a limited, representative market to measure actual consumer behavior and refine the marketing plan before a full national rollout.
Question 6: In the BCG Matrix, a product with low relative market share in a high-growth market is classified as a:
- Cash Cow
- Star
- Dog
- Question Mark (Correct answer)
Correct answer: Question Mark
Question Marks have low share in rapidly growing markets and require significant investment to determine whether they can capture enough share to become Stars.
Question 7: What does the 'diffusion of innovation' framework primarily illustrate?
- How quickly competitors can reverse-engineer a new product
- The rate at which different consumer segments adopt a new product over time (Correct answer)
- The decline in product quality as it moves through the lifecycle
- How negative word-of-mouth spreads across market segments
Correct answer: The rate at which different consumer segments adopt a new product over time
The diffusion of innovation curve categorizes consumers — from innovators and early adopters to early majority, late majority, and laggards — based on when they adopt a new product.
CMP Product Development and Management 2
In the BCG Growth-Share Matrix, a product with high relative market share in a low-growth market is classified as a: